Back to home
URL: http://mobile.deloitte-tax-news.de/german-tax-legal-news/bfh-rules-tax-authorities-guidance-providing-waiver-of-tax-on-recapitalization-gains-is-unconstitutional.html
29.03.2017
German Tax and Legal News

BFH rules tax authorities’ guidance providing waiver of tax on recapitalization gains is unconstitutional

 Each case must be decided on its own merits

 In a decision of general principle (GrS 1/15) issued on November 28, 2016 (and published on February 8, 2017), the leading senate of Germany’s Federal Tax Court (BFH) held that guidance issued by the tax authorities, which grants a general waiver of tax on recapitalization gains, violates the German constitution. The BFH stated that each case must be considered on its own merits in determining whether a waiver should be granted.

The BFH held that the requirements for a tax waiver, set out in special provisions in the General Tax Code, allow a tax waiver only if taxation leads to “factual inequity” based on an analysis of the particular case. According to established jurisprudence, factual inequity will be presumed only in exceptional cases. A waiver of tax granted by the tax authorities based on their interpretation, in generally applicable guidance, of factual inequity violates constitutional law because the tax authorities do not have legislative powers.

Based on a decree issued by the Frankfurt tax authorities on February 22, 2017, it now is being discussed at a state and federal level whether the guidance on tax waivers issued by the tax authorities remains applicable despite the BFH’s decision because of the principle that taxpayers should be able to rely on existing administrative procedure.

Until the tax authorities issue a final decision how to proceed in these matters, they will not approve any applications for a waiver of tax based on the guidance, nor will they decide on binding ruling applications. The Federal Council (Bundesrat) has suggested to the parliament that it considers enacting a law that specifically addresses the requirements for factual inequity in order to obtain a waiver of tax in the case of rehabilitation measures.

www.deloitte-tax-news.de Diese Mandanteninformation enthält ausschließlich allgemeine Informationen, die nicht geeignet sind, den besonderen Umständen eines Einzelfalles gerecht zu werden. Sie hat nicht den Sinn, Grundlage für wirtschaftliche oder sonstige Entscheidungen jedweder Art zu sein. Sie stellt keine Beratung, Auskunft oder ein rechtsverbindliches Angebot dar und ist auch nicht geeignet, eine persönliche Beratung zu ersetzen. Sollte jemand Entscheidungen jedweder Art auf Inhalte dieser Mandanteninformation oder Teile davon stützen, handelt dieser ausschließlich auf eigenes Risiko. Deloitte GmbH übernimmt keinerlei Garantie oder Gewährleistung noch haftet sie in irgendeiner anderen Weise für den Inhalt dieser Mandanteninformation. Aus diesem Grunde empfehlen wir stets, eine persönliche Beratung einzuholen.

This client information exclusively contains general information not suitable for addressing the particular circumstances of any individual case. Its purpose is not to be used as a basis for commercial decisions or decisions of any other kind. This client information does neither constitute any advice nor any legally binding information or offer and shall not be deemed suitable for substituting personal advice under any circumstances. Should you base decisions of any kind on the contents of this client information or extracts therefrom, you act solely at your own risk. Deloitte GmbH will not assume any guarantee nor warranty and will not be liable in any other form for the content of this client information. Therefore, we always recommend to obtain personal advice.